Why are smartphone shipments forecast to plunge?

Memory shortages are reshaping the smartphone market

Analysts expect a dramatic decline in global smartphone shipments in 2026 and point to a memory-chip crunch as the primary cause. The International Data Corporation (IDC) forecasted a fall of roughly 12.9% year-over-year — the largest single-year drop on record — driven largely by surging prices and constrained supply of DRAM and NAND memory.

What caused the squeeze

• Data-center and AI infrastructure demand: cloud and AI providers are consuming massive amounts of memory for large models and training workloads, tightening supply for other customers.
• Rising component costs: memory prices have climbed sharply, making RAM and flash a much larger portion of device bill-of-materials. Companies such as HP have said RAM now accounts for around 35% of PC component costs, illustrating how memory inflation is shifting economics across hardware categories.

Consequences for the industry and consumers

• Higher retail prices: manufacturers face pressure to raise device prices, which will depress demand, particularly in price-sensitive segments.
• Erosion of the budget tier: entry-level and midrange models may disappear or become much more expensive, reducing upgrade cycles and shrinking addressable markets.
• Supply-chain realignments: OEMs may prioritize higher-margin flagship models or shift orders to suppliers that can guarantee delivery, exacerbating shortages for smaller vendors.

What remains unclear

The duration of the shortage and the pace at which memory capacity will catch up to demand are uncertain. Policy responses, chipmaker investment plans, and how quickly AI players optimize for memory efficiency will all shape whether the market recovers in a single year or endures longer-term effects.